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The Feds Monetary Policy Rule: Past, Present and Future

  • Antonio Moreno

    ()

    (School of Economics and Business Administration, University of Navarra)

This paper has a twofold purpose. In the context of a structural macroeconomic model, it derives estimates of the Federal Reserve's preference parameters in its pre and post - 1980 loss function. We show that there was an economically, but not statistically, significant change in the preferences of the U.S. Fed towards inflation stabilization. We also derive, within a strict inflation targeting regime, the optimal changes in the Fed's reaction to expected inflation as a function of the forward looking parameters in the supply and demand equations.

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File URL: http://www.unav.es/facultad/econom/files/workingpapersmodule/@random437a054f974a0/1132585191_wp0204.pdf
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Paper provided by School of Economics and Business Administration, University of Navarra in its series Faculty Working Papers with number 02/04.

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Length: 21 pages pages
Date of creation: Jan 2004
Date of revision:
Publication status: Forthcoming, James Tobin conference volume "Monetary Policy and Labor Markets: A Conference in Honor
Handle: RePEc:una:unccee:wp0204
Contact details of provider: Web page: http://www.unav.es/facultad/econom

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  1. Antonio Moreno, 2003. "Reaching Inflation Stability," Faculty Working Papers 13/03, School of Economics and Business Administration, University of Navarra.
  2. Lars E. O. Svensson, 2003. "What Is Wrong with Taylor Rules? Using Judgment in Monetary Policy through Targeting Rules," Journal of Economic Literature, American Economic Association, vol. 41(2), pages 426-477, June.
  3. Clarida, Richard & Galí, Jordi & Gertler, Mark, 1998. "Monetary Policy Rules and Macroeconomic Stability: Evidence and Some Theory," CEPR Discussion Papers 1908, C.E.P.R. Discussion Papers.
  4. Kevin J. Lansing & Bharat Trehan, 2003. "Forward-looking behavior and optimal discretionary monetary policy," Working Paper Series 2001-03, Federal Reserve Bank of San Francisco.
  5. Jeff Fuhrer & George Moore, 1993. "Inflation persistence," Proceedings, Federal Reserve Bank of San Francisco, issue Mar.
  6. Julio J. Rotemberg & Michael Woodford, 1998. "An Optimization-Based Econometric Framework for the Evaluation of Monetary Policy: Expanded Version," NBER Technical Working Papers 0233, National Bureau of Economic Research, Inc.
  7. Clarida, R. & Gali, J. & Gertler, M., 1999. "The Science of Monetary Policy: A New Keynesian Perspective," Working Papers 99-13, C.V. Starr Center for Applied Economics, New York University.
  8. Jean Boivin & Marc P. Giannoni, 2003. "Has Monetary Policy Become More Effective?," NBER Working Papers 9459, National Bureau of Economic Research, Inc.
  9. Seonghoon Cho & Antonio Moreno, 2003. "A Structural Estimation and Interpretation of the New Keynesian Macro Model," Faculty Working Papers 14/03, School of Economics and Business Administration, University of Navarra.
  10. Stephen G. Cecchetti & Michael Ehrmann, 2002. "Does Inflation Targeting Increase Output Volatility?: An International Comparison of Policymakers' Preferences and Outcomes," Central Banking, Analysis, and Economic Policies Book Series, in: Norman Loayza & Klaus Schmidt-Hebbel & Norman Loayza (Series Editor) & Klaus Schmidt-Hebbel (Series (ed.), Monetary Policy: Rules and Transmission Mechanisms, edition 1, volume 4, chapter 9, pages 247-274 Central Bank of Chile.
  11. Jeffrey C. Fuhrer, 2000. "Habit Formation in Consumption and Its Implications for Monetary-Policy Models," American Economic Review, American Economic Association, vol. 90(3), pages 367-390, June.
  12. Söderlind, Paul, 1998. "Solution and Estimation of RE Macromodels with Optimal Policy," SSE/EFI Working Paper Series in Economics and Finance 256, Stockholm School of Economics.
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